Carried Interesthttp://www.businessinsider.com/category/carried-interest
en-usTue, 03 Mar 2015 14:09:22 -0500Tue, 03 Mar 2015 14:09:22 -0500The latest news on Carried Interest from Business Insiderhttp://static3.businessinsider.com/assets/images/bilogo-250x36-wide-rev.pngBusiness Insiderhttp://www.businessinsider.com
http://www.businessinsider.com/ellen-paos-attorney-just-showed-the-insane-amounts-vc-partners-get-paid-2015-2Ellen Pao's attorney just revealed the insane amounts top partners at VC firms get paidhttp://www.businessinsider.com/ellen-paos-attorney-just-showed-the-insane-amounts-vc-partners-get-paid-2015-2
Thu, 26 Feb 2015 14:15:00 -0500Sam Colt
<p><img style="float:right;" src="http://static4.businessinsider.com/image/54ef68faeab8eaf03886bccb-480-/ellen-pao-kpcb.jpg" border="0" alt="ellen pao kpcb" width="480"></p><p>Kleiner Perkins CFO Sue Biglieri took the stand on Thursday in <a href="http://www.businessinsider.com/ellen-paos-discrimination-suit-against-kleiner-perkins-goes-to-court-2015-2">Ellen Pao's gender discrimination suit against the venture capital firm</a>, where she revealed the vast difference in compensation between junior partners <span>—</span>&nbsp;its employees <span>—</span>&nbsp;and its general partners.</p>
<p>Junior partners, like Ellen Pao was before leaving Kleiner, receive both a salary and a bonus.&nbsp;<span>Pao felt she was left out of top partner meetings and wanted to be promoted to a more senior role, but she never was.</span></p>
<p>Managing members, who are sometimes called general partners, receive a portion of the profits coming from Kleiner's investments and its management fees instead of a salary and bonus.</p>
<p>Alan Exelrod, an attorney for Pao, had Biglieri calculate the difference between what partners made after they were promoted from operating roles.</p>
<p>Biglieri calculated <span>—</span>&nbsp;with some help from Judge Kahn <span>—</span>&nbsp;that one Kleiner employee earned five times as much after a promotion to general partner in 2011.&nbsp;<span style="line-height: 1.5em;">Another partner made three times as much after being promoted to general partner. A third employee promoted that year made four times as much.</span></p>
<p>When you factor in the kind of salaries Kleiner employees get paid, those multiples represent a lot of cash.</p>
<p>Kleiner attorney&nbsp;<span>Lynn Hermle said Pao's total compensation in 2011 was $516,000. So had she been promoted to a general partner it's safe to say she could have started making anywhere between $1 million and $3 million.</span></p>
<p><span>Pao is seeking $16 million in damages from Kleiner Perkins. Had she become a general partner there, it's likely she could have made much more over the course of a number of years.</span></p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/ellen-paos-discrimination-suit-against-kleiner-perkins-goes-to-court-2015-2" >Ellen Pao's $16 million gender discrimination lawsuit against Kleiner Perkins heads to court</a></strong></p>
<p><a href="http://www.businessinsider.com/ellen-paos-attorney-just-showed-the-insane-amounts-vc-partners-get-paid-2015-2#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/john-doerr-identify-tech-superstar-2014-12">Venture Capital Legend Reveals How To Spot The Next Tech Superstar</a></p> http://www.businessinsider.com/congressman-congress-probably-wont-get-anything-significant-done-2014-4Congressman Admits Congress Probably Won't Get Anything 'Significant' Done Until After Novemberhttp://www.businessinsider.com/congressman-congress-probably-wont-get-anything-significant-done-2014-4
Thu, 24 Apr 2014 16:27:47 -0400Hunter Walker
<p><img style="float:right;" src="http://static2.businessinsider.com/image/535972d06bb3f7584e347329-480-/hakeem-jeffries.jpg" border="0" alt="Hakeem Jeffries" width="480" /></p><p>Rep. Hakeem Jeffries doesn't expect Congress to get much done this year.</p>
<p>Jeffries explained why he doesn't expect much from Congress during a roundtable with local reporters at his district office in Brooklyn Thursday. The New York Democrat predicted there won't be any "significant legislative matters tackled" in Congress until after the midterm elections in November.</p>
<p>Jeffries gave his grim prognosis after Business Insider asked whether he supports killing the "Carried Interest" tax loophole, which allows certain hedge fund and private equity profits to be taxed at a lower rate. Both <a href="http://www.businessinsider.com/obama-fiscal-year-2015-budget-2014-3">President Barack Obama</a> and <a href="http://www.businessinsider.com/wall-st-donors-ditched-dave-camp-2014-2">Republican Rep. Dave Camp</a>, the chairman of the House Ways and Means Committee, made budget proposals that included eliminating the loophole earlier this year. However, in spite of this bipartisan support, the financial industry <a href="http://www.businessinsider.com/insider-wall-street-realistic-about-tax-reform-2014-2">seemed confident any plan to eliminate Carried Interest would not come to fruition</a>.</p>
<p>Jeffries said he believes eliminating Carried Interest is "one of the most reasonable proposals that should be put on the table and seriously evaluated," However, he also said&nbsp;powerful corporate interests will fight Carried Interest and any other "serious" tax reform "ferociously" and would be particularly successful since this is a midterm election year.&nbsp;</p>
<p>"There are a lot of entrenched interests in Washington D.C. and a lot of people with significant economic power who will be impacted by changes to the tax code such as the Carried Interest adjustment that are going to weigh in ferociously to prevent some things from happening, particularly in an election year," said Jeffries.</p>
<p>And tax reform isn't the only initiative Jeffries doesn't expect Congress to work on until after the November elections.</p>
<p>Jeffries went on to say immigration reform is the only "significant" issue with any chance of being addressed in Washington before the end of the year. He attributed this to both the House Republican majority and the Senate Democrats being more concerned about their respective positioning than consequential legislation. &nbsp;</p>
<p>"No one thinks at this moment that anything major will occur prior to November, because I think the House majority wants to protect its situation. And many have actually said that they don't expect significant things to occur this year," explained Jeffries. "The Senate is also in a precarious situation and I think they'll proceed responsibly, but also with caution. And so, it's likely that we're not going to see any significant legislative matters tackled, perhaps short of comprehensive immigration reform, which is still somewhat a possibility, until after the November midterms."</p><p><a href="http://www.businessinsider.com/congressman-congress-probably-wont-get-anything-significant-done-2014-4#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/obama-fiscal-year-2015-budget-2014-3Obama Still Wants To Kill Wall Street's Favorite Tax Loopholehttp://www.businessinsider.com/obama-fiscal-year-2015-budget-2014-3
Mon, 03 Mar 2014 20:00:00 -0500Hunter Walker
<p><img src="http://static5.businessinsider.com/image/53062b896bb3f7e93816d246-800-/ap777156405000.jpg" border="0" alt="Barack Obama" width="800" /></p><p></p>
<p>President Barack Obama is releasing his budget for fiscal year 2015 Tuesday and there's one part Wall Street won't like. The White House sent out a preview of the budget Monday that reveals Obama is still trying to kill the "Carried Interest" tax loophole, which allows hedge fund and private equity profits to be taxed at a lower rate. According to the White House preview, this and other changes in the budget are designed to help the middle class.&nbsp;</p>
<p>"The President&rsquo;s budget will show in real terms the choices we can make to expand economic opportunity and strengthen the middle class, like closing unfair tax loopholes so we can invest in the things we need to help the middle class and those striving to get into it, grow our economy, and provide economic opportunity for every American," the preview said. "It invests in infrastructure, job training, and preschool; cuts taxes for working Americans while closing tax loopholes enjoyed by the wealthy and well-connected; and reduces the deficit."</p>
<p><span>Obama has unsuccessfully tried to end the carried interest loophole&nbsp;</span><span></span><a href="http://thinkprogress.org/economy/2013/04/12/1859951/why-obamas-budget-eliminates-the-carried-interest-tax-loophole/#">in prior budgets</a><span>.&nbsp;</span></p>
<p>This is the second recent proposal to kill the carried interest loophole. Last week, Rep. Dave Camp, the Republican chairman of the House Ways and Means Committee, released a tax reform plan that included ending the loophole.&nbsp;<span style="font-size: 15px; line-height: 1.5em;">Additionally, Camp's plan included a proposal to raise taxes on firms holding over $500 billion in assets.&nbsp;</span><span style="font-size: 15px; line-height: 1.5em;">Camp's plan sparked reports of a possible&nbsp;</span><a href="http://www.businessinsider.com/wall-street-war-over-tax-reform-bill-2014-2">Wall Street revolt</a><span style="font-size: 15px; line-height: 1.5em;"> against the Republican Party. An industry insider later told Business Insider those rumors were exagerrated, but only because financial firms knew Camp's proposal had </span><a href="http://www.businessinsider.com/insider-wall-street-realistic-about-tax-reform-2014-2">little chance of reaching a vote on the House floor</a><span style="font-size: 15px; line-height: 1.5em;">.&nbsp;</span></p>
<p>Obama's budget contains several other notable changes in addition to the plan to end the carried interest loophole. The president would also expand the Earned Income Tax Credit and Child Tax Credit. Obama's plan to grow the EITC focuses on childless workers. Currently, the EITC largely benefits people who are married and have children. The White House said these changes would be funded by "closing tax loopholes that let high-income professionals avoid the income and payroll taxes everyone else has to pay."</p>
<p>The budget also proposes expanding the Child and Dependent Care Tax Credit. According to the White House, this would give "about 1.7 million families" an "average tax cut of more than $600."</p>
<p>Obama is also proposing the establishment of automatic IRAs to encourage workers to save for their retirement. The White House said this program would cause "about 13 million workers" to begin contributing to auto-IRAs.</p>
<p>Lastly, Obama is proposing several plans aimed at students paying for college. The White House said his budget would permanently extend the American Opportunity Tax Credit, "simplify" taxes for the recipients of Pell Grants, and would exclude "<span style="font-size: 15px; line-height: 1.5em;">student loan forgiveness from taxation for borrowers who have made student loan payments for many years under an income-related repayment plan."</span></p><p><a href="http://www.businessinsider.com/obama-fiscal-year-2015-budget-2014-3#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/wall-st-donors-ditched-dave-camp-2014-2Wall Street Donors Ditched The Republican Behind The New Tax Reform Billhttp://www.businessinsider.com/wall-st-donors-ditched-dave-camp-2014-2
Wed, 26 Feb 2014 12:06:00 -0500Linette Lopez
<p><img src="http://static4.businessinsider.com/image/530e202269bedd4612b68e13-1200-924/dave-camp-and-fred-upton.png" border="0" alt="dave camp and fred upton" /></p><p>How does a Republican dare to stand up to Wall Street and propose a tax bill that slaughters some if the industry's sacred cows?</p>
<p>They stop getting Wall Street money.</p>
<p>At least that's how it appears it went in Senator Dave Camp's (R-MI) case.</p>
<p>He is co-authoring a&nbsp;bill with Senator Max Baucus (D-MT) that would raise taxes on financial institutions with more than $500 billion in assets &mdash; so the JP Morgan's and Goldman Sachs' of the world.</p>
<p>The bill would also close a loophole called 'carried interest' that allows profits from hedge funds and private equity firms to be taxed at a lower 15% rate.</p>
<p>Here's how Camp described it in an editorial in the <a href="http://online.wsj.com/news/articles/SB10001424052702303426304579403252458098042">Wall Street Journal:</a></p>
<p style="padding-left: 30px;">We can clean up provisions like <strong>"carried interest" that allow certain private-equity firms to get the investment-income tax rate on what anyone else would call normal wage income</strong>. We'll also put an end to special depreciation benefits related to corporate jets and close, once and for all, the infamous "John Edwards" loophole that allows a select few to avoid employment taxes on their income. The revenue gained from that provision, and many others like shifting to Roth-style retirement accounts for those contributing more than $8,750 (only 5% of the workforce) can be used to lower tax rates across the board.</p>
<p>It's a bold move, and outlets like <a href="http://www.politico.com/story/2014/02/republicans-wall-street-103968.html">Politico</a> say that it's dead on arrival to the GOP-controlled House of Representatives.</p>
<p>Still, the bill is still likely to do two ugly things during an election year &mdash; cause infighting among Republicans, and allow Camp and Baucus to be as loud about this uncomfortable (for Wall Street) issue as they like.</p>
<p>And Camp has room to raise his voice.</p>
<p>In 2011 and 2012, financial firms were top contributors to Camp's operation. Private Equity firm Blackstone and its employees Camp's ranked number two on the list of Camp's top 20 sources of campaign cash during that time, throwing down $48,000. Hedge fund Elliott Management, founded by vocal conservative billionaire Paul Singer came in third with $45,000, according to <a href="https://www.opensecrets.org/politicians/contrib.php?cycle=2012&amp;cid=N00008086&amp;type=C&amp;newmem=N">OpenSecrets.org.</a></p>
<p>Private equity firm Carlyle Group, JP Morgan, Bank of America, Citigroup, and UBS also made the top 20 in 2011-2012.</p>
<p>In 2013 and 2014, though, Camp's donor list changed. UBS was the only Wall Street firm that cracked with <a href="https://www.opensecrets.org/politicians/contrib.php?cycle=2014&amp;cid=N00008086&amp;type=C&amp;newmem=N">top 20 donor list with an $11,000 contribution.</a></p>
<p>So Camp is free to raise as much hell as he likes on this issue.</p>
<p>And some Wall Streeters may not be mad at him for it. Pershing Square founder Bill Ackman has said hedge fund managers like him wouldn't mind a carried interest tax hike. In early 2012, he said&nbsp;<a href="http://www.businessinsider.com/bill-ackman-says-hedge-funders-wouldnt-mind-a-higher-tax-rate-on-carried-interest-income-2012-1#ixzz2uRn7vXYy">carried interest is "not as a good a deal"</a> for hedge funds as it is for private equity.</p>
<p>All in all, this is an old dance. Since 2007, Congressman Sander Levin (D-MI) has raised the carried interest issue in the House 3 times. Ultimately, his attempts to raise the rate have always been thwarted in the Senate.</p>
<p>Back in 2010, carried interest was left alone as part of a deal between Obama and Republicans that also continued Bush era tax cuts.</p>
<p>In February 2012 Levin brought the issue up in a bill called the Carried Interest Fairness Act and got shot down.</p>
<p>We'll see what happens this time.</p><p><a href="http://www.businessinsider.com/wall-st-donors-ditched-dave-camp-2014-2#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/obama-to-tackle-carried-interest-2013-2Obama Called Out Hedge Fund Managers And Private Equity Firms Last Night, And They Didn't Like Ithttp://www.businessinsider.com/obama-to-tackle-carried-interest-2013-2
Mon, 04 Feb 2013 09:23:06 -0500Linette Lopez
<p><img style="float:right;" src="http://static3.businessinsider.com/image/510fc2ef69beddf66700000c-400/obama-immigration-2.png" border="0" alt="obama immigration" /></p><p>In an interview before the Super Bowl, President Obama took a jab at hedge funds and private equity firms across the country, saying that he would finally take on "carried interest" tax, <a href="http://www.reuters.com/article/2013/02/04/us-usa-taxes-obama-idUSBRE9120E720130204">Reuters reports.</a></p>
<p>There were whispers about the Obama administration tackling carried interest after the election, but it wasn't until last night that we heard anything specific from the President. Wall Street loves the rule because it allows hedge funds and private equity firms to pay tax on a substantial chunk of their income at a discounted rate &mdash; 20%.</p>
<p>The <a href="http://www.taxpolicycenter.org/briefing-book/key-elements/business/carried-interest.cfm">Tax Policy Center</a> gets more specific:</p>
<p style="padding-left: 30px;">Carried interest is a right that entitles the general partner (GP) of a private investment fund to a share of the fund&rsquo;s profits (see figure 1). Typically, the GP contributes 1 to 5 percent of the fund&rsquo;s initial capital and commits to managing the fund&rsquo;s assets. In exchange, the GP receives an annual management fee of 2 percent of the fund&rsquo;s assets plus a "carried interest" of 20 percent of the fund&rsquo;s profits that exceed a certain "hurdle" rate of return. The individual partners of the GP, not the GP itself, are taxed on these payments.</p>
<p>Last night, Obama said that he wasn't looking to raise tax rates, but we the country does need more revenue and carried interest is an easy target since so few people deal with it.</p>
<p><a href="http://www.reuters.com/article/2013/02/04/us-usa-taxes-obama-idUSBRE9120E720130204">From Reuters:</a></p>
<p style="padding-left: 30px;">There is no doubt we need additional revenue, coupled with smart spending reductions in order to bring down our deficit. And we can do it in a gradual way so that it doesn't have a huge impact," he said.</p>
<p style="padding-left: 30px;">Obama indicated he would seek to end deductions that are not available to all Americans, singling out "carried interest," which refers to the tax rate paid by many private equity managers, venture capital and real estate partnerships.</p>
<p>And despite the fact that hedge fund managers (like <a href="http://www.businessinsider.com/tepper-on-what-hed-do-as-president-2012-12">David Tepper</a> and <a href="http://www.businessinsider.com/bill-ackman-says-hedge-funders-wouldnt-mind-a-higher-tax-rate-on-carried-interest-income-2012-1">Bill Ackman</a>) have said that they could deal with a higher rate, despite the fact that private equity CEO's like Carlyle Group's <a href="http://www.businessinsider.com/wall-street-carried-interest-tax-issue-2012-11">David Rubenstein</a> have been saying that this issue was going to come up for months, there has already been some push back from industry lobbies.</p>
<p>Reuters:</p>
<p style="padding-left: 30px;">"Given the 58 percent increase in taxes paid on capital gains as part of the recent deal to avert the fiscal cliff, it is our hope that any tax reform effort in 2013 will be about crafting policies that incentivize economic growth," said Steve Judge, president and chief executive of Private Equity Growth Capital Council, responding to Obama's comments.</p>
<p>Ronald Reagan raised capital gains rates to 28% back in 1986, so expect to hear a lot of references to that during this fight.</p>
<p>Another thing proponents of reform have on their side is that there's already a bill called the <a href="http://www.businessinsider.com/blackboard/carried-interest" class="hidden_link">Carried Interest</a> Fairness Act sponsored by Congressman Sander Levin (D-MI)<a href="http://www.govtrack.us/congress/bills/112/hr4016"> but it's been stuck in the Ways and Means Committee since last February.</a> </p><p><a href="http://www.businessinsider.com/obama-to-tackle-carried-interest-2013-2#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/wall-street-just-fine-after-fiscal-cliff-2013-1Wall Street Wins Big In Fiscal Cliff Negotiationshttp://www.businessinsider.com/wall-street-just-fine-after-fiscal-cliff-2013-1
Wed, 02 Jan 2013 12:29:00 -0500Linette Lopez
<p><img style="float:right;" src="http://static5.businessinsider.com/image/50e4639d6bb3f79f64000013-400-299/cigar-banker.jpg" border="0" alt="cigar banker" width="400" height="299" /></p><p>For all the haranguing about what the fiscal cliff could do to Wall Street's wealthy, now that the deal's been done, it actually looks like things didn't work out so badly for them.</p>
<p>Think about the issues that really matter to the financial world &mdash; capital gains (especially carried interest) tax, income tax, and estate tax rates. In all these cases, the Democrats negotiated down from the Street's worst case scenario, or in carried interest's case, didn't touch the current policy at all.</p>
<p>Take the tax on dividends. The top rate increased to 20%,<a href="http://www.forbes.com/sites/deanzerbe/2013/01/01/fiscal-cliff-tax-deal-what-does-it-mean-for-small-business/"> not the 39.6% some Democrats wanted.</a> This is good news for investors as well as bankers getting their bonuses paid out in stock (as they have been more and more since the financial crisis).</p>
<p>Not everyone will remember this, but back in <a href="http://www.forbes.com/sites/deanzerbe/2013/01/01/fiscal-cliff-tax-deal-what-does-it-mean-for-small-business/">1986, Ronald Reagan himself raised the dividend tax rate</a> to the same rate as regular income tax in his massive tax overhaul. They weren't lowered again until George Bush Sr. took office.</p>
<p>Under the capital gains umbrella falls another Wall Street darling, especially for hedge funds and private equity firms &mdash; the <a href="http://www.businessinsider.com/wall-street-carried-interest-tax-issue-2012-11">carried interest</a> tax rate. It's the percentage of an investment fund's profits that a general partner is allowed to take home after the fund has reached a certain "hurdle" rate of return (the 20 of the infamous "2 and 20" investment firm payment structure), and it was taxed at 15%.</p>
<p>Late last year Carlyle Group's David Rubenstein said he wouldn't be surprised if the rate, which some consider a "loop-hole" went up. In fact, some money managers, <a href="http://www.businessinsider.com/tepper-on-what-hed-do-as-president-2012-12">like David Tepper,</a> seemed<a href="http://www.businessinsider.com/bill-ackman-says-hedge-funders-wouldnt-mind-a-higher-tax-rate-on-carried-interest-income-2012-1"> okay with</a> getting rid of it all-together. Even <a href="http://www.businessinsider.com/blackboard/mitt-romney" class="hidden_link">Mitt Romney</a> admitted that <a href="http://www.businessinsider.com/watch-mitt-romney-gets-asked-about-carried-interest-and-his-response-is-almost-painful-2012-3">carried interest should be considered</a> when he was running for President.</p>
<p>However, Democrats didn't try to tinker with this item beyond the 5% capital gains dividend rate increase.</p>
<p>Then there's ordinary income tax. The Bush tax cuts are over for anyone making over $400,000 (and couples making $450,000), so they'll be paying $39.6% instead of 35%, but the Democrats lost on their initial attempt to get that rate raised for individuals making $200,000.</p>
<p>Lastly, there's estate tax, an issue close to the heart of anyone passing on a small business (like, say an investment firm). The top rate went up to 40% (from 35%), <a href="http://www.forbes.com/sites/deanzerbe/2013/01/01/fiscal-cliff-tax-deal-what-does-it-mean-for-small-business/">increasing revenue from this policy by $19 billion</a>, but Democrats also wanted to kill the exemption for estates under $5 million during these negations.</p>
<p>That could've happened easily too, had a 2010 measure setting the exemption at $5 million been allowed to <a href="http://www.cnbc.com/id/100341727/Will_039Fiscal_Cliff039_Accelerate_Millionaire_Deaths">expire on January 1.</a> Instead the exemption was kept in place for estate and gift purposes.</p>
<p>So see, everything going to be okay... right?</p>
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<noscript>&lt;div&gt;Please enable Javascript to watch this video&lt;/div&gt;</noscript><p><a href="http://www.businessinsider.com/wall-street-just-fine-after-fiscal-cliff-2013-1#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/tepper-on-what-hed-do-as-president-2012-12David Tepper Probably Just Made Some People In Hedge Funds And Private Equity Pretty Angryhttp://www.businessinsider.com/tepper-on-what-hed-do-as-president-2012-12
Mon, 17 Dec 2012 09:11:00 -0500Linette Lopez
<p><img style="float:right;" src="http://static2.businessinsider.com/image/50cf2724eab8ead46100002e-400-300/david-tepper-4.png" border="0" alt="david tepper" width="400" height="300" /></p><p><a href="http://www.businessinsider.com/blackboard/david-tepper" class="hidden_link">David Tepper</a> just finished a rare appearance on Squawk Box this morning, covering everything from the Fed to the situation in Europe.</p>
<p>The billionaire founder of hedge fund <a href="http://www.businessinsider.com/blackboard/appaloosa-management" class="hidden_link">Appaloosa Management</a> also got into politics, as people are wont to do during these fiscal cliff days, and lucky for us, the folks at Squawk got him right to the point.</p>
<p>They asked Tepper what he would do as President of the United States right now.</p>
<p>"What I would do if I was President?," Tepper responded, "hard&nbsp; job... I would really lead on Medicare stuff that everybody knows has to get done."</p>
<p>Tepper went on to explain that he thinks the President needs to lead on that front since it's hard for Republicans to say what they want to cut. He's in favor not of massively gutting the program ("like some of these guys are") but he does think it's time to raise the age for eligibility since Americans are living longer.</p>
<p>Of course, that's just the spending side. On the revenue raising side, Tepper was probably even more adamant about what should be done.</p>
<p>"Raise my rate, I don't care. I know some guys are going to be mad at me but, get rid of this stupid carried interest. I hope it's gone."</p>
<p>Carried interest is a big deal for hedge fund managers and private equity firms. It's the money that is left over for an investment manager, after expenses, salaries, and investors are paid etc., and it is taxed as capital gain (15%) rather than as regular income (35%). Critics have said, though, that funds don't take enough risk with that money for it to be taxed at a lower rate, especially when they have a fixed pool of investment capital.</p>
<p>&nbsp;</p><p><a href="http://www.businessinsider.com/tepper-on-what-hed-do-as-president-2012-12#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/how-wall-street-uses-carried-interest-2012-11A Former Hedge Fund Manager Breaks Down How Wall Street Uses Its Favorite Tax Loophttp://www.businessinsider.com/how-wall-street-uses-carried-interest-2012-11
Fri, 16 Nov 2012 08:55:11 -0500Michael
<p><img style="float:right;" src="http://static4.businessinsider.com/image/50a6455869bedd677800002d-400-300/monopoly-man-rich.jpg" border="0" alt="monopoly man rich" width="400" height="300" /></p><p>I wrote last week that one of the great lessons of the recent Presidential campaign, for me, is <a href="http://www.bankers-anonymous.com/blog/534/">how little we as a country understand income tax policy</a>.</p>
<p>Since we&rsquo;re about to engage in a crash course in fiscal policy<a href="http://www.bankers-anonymous.com/blog/shhhhhh-please-dont-talk-about-my-tax-loophole/#_ftn1" title="">[1]</a> it&rsquo;s worth focusing on the loophole of carried interest.</p>
<p>Both Presidential candidates referred in the debates to closing income tax loopholes, yet both were deathly afraid of mentioning anything specific, such as the egregious carried interest income tax loophole for hedge funds and private equity funds.&nbsp; Romney skipped it because his entire <a class="hidden_link" href="http://www.businessinsider.com/blackboard/bain-capital">Bain Capital</a> career benefitted from it, and Obama skipped it because he&rsquo;s derived a healthy portion of campaign funding from the same industry.<a href="http://www.bankers-anonymous.com/blog/shhhhhh-please-dont-talk-about-my-tax-loophole/#_ftn2" title="">[2]</a></p>
<p>Industry-specific loopholes like this always prove notoriously difficult to close, because benefits accrue to an intensely interested, knowledgeable, and well funded group, while the general public has minimal to no knowledge of the loophole, no voice at the table, and only earns a very diffuse benefit by closing the loophole.</p>
<p>If you don&rsquo;t know what carried interest is, then you&rsquo;re not particularly close to anyone in the hedge fund or private equity world.&nbsp; Frankly, that is the way we in the investment world would like to keep things.&nbsp; <a href="http://www.bankers-anonymous.com/blog/adult-conversation-about-income-tax-policy/">You &ndash; in the dark.&nbsp; Us &ndash; avoiding taxes</a>.</p>
<p>However, as a recovering fund manager dedicated to a fearless moral inventory of all things financial, I&rsquo;ll explain what you&rsquo;ve been missing by telling my story.</p>
<p><strong>How I tried, ignorantly, to forgo my right to an awesome loophole</strong></p>
<p>When I set up my private limited investment partnership &ndash; also called, inaccurately, a hedge fund<a href="http://www.bankers-anonymous.com/blog/shhhhhh-please-dont-talk-about-my-tax-loophole/#_ftn3" title="">[3]</a> &ndash; my attorney insisted I set up not one additional Limited Liability Company in Delaware, but rather two.&nbsp; I tried to resist him, saying I felt most comfortable with just one new business entity.<a href="http://www.bankers-anonymous.com/blog/shhhhhh-please-dont-talk-about-my-tax-loophole/#_ftn4" title="">[4]</a>&nbsp; I was so averse to two new entities that I asked another attorney for a second opinion. &nbsp;He told me the same thing. &nbsp;I needed two entities. &nbsp;I asked my accountant.&nbsp; His response was, of course, &ldquo;two entities,&rdquo; and complete puzzlement at my resistance.&nbsp; Clearly, they knew something that I didn&rsquo;t.&nbsp; That something is the awesomeness of the carried interest loophole.&nbsp; Needless to say, I got the extra LLC.<a href="http://www.bankers-anonymous.com/blog/shhhhhh-please-dont-talk-about-my-tax-loophole/#_ftn5" title="">[5]</a></p>
<p><strong>Two types of income require two entities</strong></p>
<p>Why did my attorney and accountant insist I create a separate entity?&nbsp; Because that separate entity can collect payments in the form of &lsquo;incentive allocation,&rsquo; also known as &lsquo;carried interest,&rsquo; which is taxed advantageously, at the same rate as long-term capital gains<a href="http://www.bankers-anonymous.com/blog/shhhhhh-please-dont-talk-about-my-tax-loophole/#_ftn6" title="">[6]</a> rather than as ordinary income.&nbsp; Here&rsquo;s how it works.</p>
<p>If you set up a traditional hedge fund<a href="http://www.bankers-anonymous.com/blog/shhhhhh-please-dont-talk-about-my-tax-loophole/#_ftn7" title="">[7]</a>, first things first: you&rsquo;ll want to charge the traditional &ldquo;2/20.&rdquo;<a href="http://www.bankers-anonymous.com/blog/shhhhhh-please-dont-talk-about-my-tax-loophole/#_ftn8" title="">[8]</a> Embedded in this short-hand lingo of &ldquo;2/20&rdquo; for hedge fund fees are two types of income.</p>
<p>With the two types of income, you need the two entities to keep the income tracked separately.&nbsp; Entity #1 collects the &ldquo;2,&rdquo; which is taxed like regular business income, and Entity #2 collects the &ldquo;20,&rdquo; which collects your totally awesome income at a lower tax rate.</p>
<p>The &ldquo;2&rdquo; refers to an annual management fee of 2% of assets under management.&nbsp; On a small/medium-sized hedge fund of, for example, $500 million under management, you will collect $10 million in management fees per year.&nbsp; The purpose of this money is to pay for rent, staff, overhead, technology, research &ndash; in short all the things you need to do as a fiduciary for the proper care and feeding of the client&rsquo;s money.&nbsp; This management fee income will net out with business expenses, and may or may not ever generate &ldquo;profit&rdquo; for the manager.&nbsp; In some fundamental sense, it&rsquo;s not supposed to generate profit; hedge fund managers are fine earning zero profits from management fees since the $10 million is taxed like ordinary income at 35%, which is, as you know, kinda lame.</p>
<p>The &ldquo;20&rdquo; refers to the incentive allocation, meaning specifically that 20% of all annual gains are retained by the manager, in entity #2, as &lsquo;carried interest.&rsquo;&nbsp; Here, the hedge fund manager takes full advantage of the loophole.&nbsp; If the $500 million fund has a gain on investments of 10% this year, fully 20% of the $50 million gain on investments &ndash; that is to say $10 million &ndash; gets earned by the hedge fund manager&rsquo;s entity #2 as the &lsquo;incentive allocation&rsquo; or &lsquo;carried interest.&rsquo;</p>
<p>At this point, that &lsquo;carried interest&rsquo; gets treated at the rate of capital gains, a 15% tax rate, rather than the 35% taxable rate of ordinary income.&nbsp; Often, by design, the hedge fund manager leaves the entire 20% incentive allocation inside the fund for it to grow long term.&nbsp; The manager only owes $1.5 million in taxes (15% of $10 million, at the capital gains tax rate) instead of $3.5 million (35% of $10 million, at the ordinary income tax rate).&nbsp; <em>As a result of the special tax treatment for &lsquo;carried interest,&rsquo; the small/medium hedge fund manager in our example keeps $2 million more than he otherwise would have been entitled to keep</em><strong>.&nbsp; </strong>That&rsquo;s a good deal, for him.</p>
<p>And that&rsquo;s just one year.</p>
<p>And that&rsquo;s just for kind of a small hedge fund.</p>
<p>You can imagine the bigger, scale-able results available for when a John Paulson-type fund manager scores &nbsp;big by shorting the subprime mortgages market in 2007 (probably saved about $740 million in taxes with the loophole) or buying gold in 2010 (probably saved about $980 million in taxes with the loophole)<a href="http://www.bankers-anonymous.com/blog/shhhhhh-please-dont-talk-about-my-tax-loophole/#_ftn9" title="">[9]</a></p>
<p>You can also see why my attorneys and accountant insisted that I set up a separate entity that could take advantage of the tax loophole for carried interest.&nbsp; My keep-my-life-simple approach made absolutely no sense in the face of potential millions in tax savings year after year.&nbsp; And they knew that.</p>
<p><strong>Is carried interest deserving of special treatment?</strong></p>
<p>Is there anything special about &lsquo;carried interest&rsquo; that justifies the preferred tax treatment?</p>
<p>Proponents argue that because much of &lsquo;carried interest&rsquo; stays invested inside of hedge funds, still at a risk of loss, that additional risk justifies the 15% preferred tax rate.</p>
<p>But typically much of that &lsquo;carried interest&rsquo; left in the market could be liquidated and taken out by the hedge fund manager anytime.<a href="http://www.bankers-anonymous.com/blog/shhhhhh-please-dont-talk-about-my-tax-loophole/#_ftn10" title="">[10]</a>&nbsp; (You know what else is risky?&nbsp; Having a job, with a salary, that you could be fired from next week, but you have to pay a much higher tax rate on that salary.&nbsp; That&rsquo;s pretty risky too.)</p>
<p>Other proponents of &lsquo;carried interest&rsquo; argue that tax policy should incentivize the accumulation of our economy&rsquo;s scarce investment capital, basically <a href="http://www.bankers-anonymous.com/book/book-review-unintended-consequences/">the Ed Conard argument for lower taxes on wealth and investments</a>.</p>
<p>In my opinion, that&rsquo;s bunk.&nbsp; Capital is not that scarce for any truly innovative segment of the economy.&nbsp; Most hedge funds and private equity investments offer little value-added as innovative engines of the economy.&nbsp; I know that&rsquo;s my hypothesis, not a provable assertion, but I&rsquo;ve seen enough on the inside to know &ndash; these hedge funds are not the engines of innovation you&rsquo;re looking for.</p>
<p>At the end of the day, the &lsquo;carried interest&rsquo; money is treated better than salary money because it&rsquo;s been earned by a special class of people &ndash; hedge fund and private equity fund managers &ndash; who are much more influential in the political process than the average worker.&nbsp; Full stop.</p>
<p>All of this is why I wrote last week that I would appreciate it if both sides of the political aisle would just <a href="http://www.bankers-anonymous.com/blog/534/">stop lying to us about fiscal policy and loopholes and treat us like adults</a>.&nbsp; I&rsquo;m ready to be pleasantly surprised.&nbsp; But I&rsquo;m not going to turn blue holding my breath.</p>
<p>&nbsp;</p>
<hr width="33%" size="1" />
<div>
<p><a href="http://www.bankers-anonymous.com/blog/shhhhhh-please-dont-talk-about-my-tax-loophole/#_ftnref1" title="">[1]</a> Thanks to the overheated discussion of a completely politically synthetically created crisis known as the Fiscal Cliff.</p>
</div>
<div>
<p><a href="http://www.bankers-anonymous.com/blog/shhhhhh-please-dont-talk-about-my-tax-loophole/#_ftnref2" title="">[2]</a> Don&rsquo;t be overly misled by some of the <a href="http://www.newyorker.com/reporting/2012/10/08/121008fa_fact_freeland?currentPage=1">anti-Obama rhetoric from titans of the hedge fund industry</a> like Omega&rsquo;s <a class="hidden_link" href="http://www.businessinsider.com/blackboard/leon-cooperman">Leon Cooperman</a>.&nbsp; Despite Cooperman&rsquo;s choice comparisons to Nazism, or <a href="http://dealbreaker.com/2010/12/dan-loeb-has-some-advice-for-anyone-feeling-used-and-abused-by-barack-obama/#more-32437">Dan Loeb saying Obama&rsquo;s treats them like &lsquo;battered wives,&rsquo;</a> hedge fund and private equity managers know that Obama&rsquo;s been all talk and no action when it comes to what they really care about.&nbsp; Which is the carried interest loophole.</p>
</div>
<div>
<p><a href="http://www.bankers-anonymous.com/blog/shhhhhh-please-dont-talk-about-my-tax-loophole/#_ftnref3" title="">[3]</a> A pet peeve of mine as well as for many people in the industry, the use of the term &lsquo;hedge fund&rsquo; to describe what is better described as a &lsquo;private investment limited partnership.&rsquo;&nbsp; &lsquo;Hedge fund&rsquo; implies something that has no relation to my business.&nbsp; I did no hedging.</p>
</div>
<div>
<p><a href="http://www.bankers-anonymous.com/blog/shhhhhh-please-dont-talk-about-my-tax-loophole/#_ftnref4" title="">[4]</a> My reason at the time was that as a small business, I wanted to keep things simple.&nbsp; A new entity meant the additional cost of entity creation and maintenance, a separate set of accounting books, a separate set of tax returns, etc.&nbsp; Boy was I wrong about the potential costs and benefits, as I&rsquo;ll explain below.</p>
</div>
<div>
<p><a href="http://www.bankers-anonymous.com/blog/shhhhhh-please-dont-talk-about-my-tax-loophole/#_ftnref5" title="">[5]</a> Here&rsquo;s a handy rule of thumb for non-financial people:&nbsp; Whenever you see a company or business situation with lots and lots of separate business entities, you can be confident there&rsquo;s tax avoidance going on.&nbsp; It&rsquo;s possible there&rsquo;s also an attempt to shield the principals from bankruptcy, but it&rsquo;s either that, or tax avoidance.&nbsp; Anyway, just an FYI.</p>
</div><p><a href="http://www.businessinsider.com/how-wall-street-uses-carried-interest-2012-11#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/watch-mitt-romney-gets-asked-about-carried-interest-and-his-response-is-almost-painful-2012-3WATCH: Mitt Romney Gets Asked About Carried Interest, And His Response Is Almost Painfulhttp://www.businessinsider.com/watch-mitt-romney-gets-asked-about-carried-interest-and-his-response-is-almost-painful-2012-3
Wed, 07 Mar 2012 10:55:06 -0500Linette Lopez
<p>Ever since Mitt Romney's career at <a class="hidden_link" href="http://www.businessinsider.com/blackboard/bain-capital">Bain Capital</a> became an issue in this Presidential race, the debate about whether or not private equity firms should be taxed at a 15% rate for carried interest income has become an issue as well.</p>
<p>The question went quiet for a while, but it resurfaced when <a class="hidden_link" href="http://www.businessinsider.com/blackboard/mitt-romney">Mitt Romney</a> made an appearance on CNBCs Squawk Box this morning.</p>
<p>Host Joe Kernan asked Romney what he would do about the carried interest tax rate, since it effects private equity (one of the country's "bright spots") so much.</p>
<p>Romney's response was probably not what his former colleagues in the industry wanted to hear.</p>
<p>He said it's not up to Congress or the Administration to decide what is carried interest income or what is a capital gain (huh?).</p>
<p>The question is, he pointed out, the risk of loss. If there's no risk, it should be taxed as ordinary income, simple as that.</p>
<p style="padding-left: 30px;">"I think you have to look at each dimension of our income streams and ask if this is a true capital gain or carried income. <strong>And you look to either the Courts or the IRS to and look at the various structures and investment vehicles and say 'gosh is this a true capital investment with the risk of loss or is it instead ordinary income with no particular risk of loss.</strong> <strong>If it's ordinary income you should treat it as ordinary income and if it's capital gain you should treat it as capital gain. </strong>I don't believe that it's Congress' job or the Administration's job to say 'hey these people are making to much money lets change their tax rate to make them less able to be financially successful.' I think you do however need to apply the code in a way that's consistent across the board.</p>
<p>From the sounds of it, Romney doesn't want to make this decision at all. But if he really had to, he might make a lot of industry people upset.</p>
<p>Watch the video below.</p>
<p><iframe width="560" height="315" frameborder="0" src="http://www.youtube.com/embed/W4jK19ceqz0"></iframe></p><p><a href="http://www.businessinsider.com/watch-mitt-romney-gets-asked-about-carried-interest-and-his-response-is-almost-painful-2012-3#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/the-private-equity-industry-has-really-spent-a-ton-of-money-to-keep-the-carried-interest-tax-rate-2012-1The Private Equity Industry Has Really Spent A Ton Of Money To Keep The Carried Interest Tax Ratehttp://www.businessinsider.com/the-private-equity-industry-has-really-spent-a-ton-of-money-to-keep-the-carried-interest-tax-rate-2012-1
Mon, 30 Jan 2012 15:28:27 -0500Linette Lopez
<p><img style="float:right;" src="http://static5.businessinsider.com/image/4f158a806bb3f75758000038/mitt-romney-debate.jpg" border="0" alt="Mitt Romney debate" /></p><p>After last week's news cycle, we know that part of the reason Mitt Romney pid a 13.9% tax rate was because of the 15% tax rate on carried interest profits.</p>
<p>This week, <a href="http://motherjones.com/politics/2012/01/bain-lobbying-saved-mitt-romney-millions">Mother Jones</a> has a story about how that tax rate has survived for so long. The year to really look at is 2007, when the private equity industry tripled its lobbying efforts (read: money) &mdash; <a href="http://www.opensecrets.org/industries/lobbying.php?cycle=2012&amp;ind=F2600">from&nbsp;1998 to 2006, PE firms spent $3 million a year on lobbying.</a> Bain was no slouch in this campaign.</p>
<p><a href="http://motherjones.com/politics/2012/01/bain-lobbying-saved-mitt-romney-millions">From Mother Jones</a>:</p>
<p style="padding-left: 30px;">After Democrats won control of both the House and the Senate in the 2006 midterm elections, they advanced several pieces of legislation that threatened to end this lucrative quirk of the tax code and other tax policies that favor the rich... <strong>The firm (Bain) spent $300,000 between August of 2007 and April of 2008 lobbying the House and Senate on bills that threatened the carried interest loophole. Along with other private equity titans like Kohlberg Kravis Roberts and <a class="hidden_link" href="http://www.businessinsider.com/blackboard/apollo-management">Apollo Management</a>, Bain and its ilk paid lobbying shops, public relations firms, and trade groups like Ogilvy and the Private Equity Growth Capital Council an estimated $15 million between January 2009 and April 2010 to convince lawmakers to keep the loophole alive</strong>. The force of those combined lobbying efforts kept the carried interest loophole wedged open, denying the federal government some $10 billion in revenues in the process.</p>
<p>Last year, Bain terminated its membership with the Private Equity Growth Council <a href="http://www.opensecrets.org/pacs/lookup2.php?strID=C00495002&amp;cycle=2012">(</a><a href="http://www.opensecrets.org/pacs/lookup2.php?strID=C00495002&amp;cycle=2012">which has raised over $70,000 in 2012 alone)</a>, but that doesn't mean they don't spend money on lobbying. According to OpenSecrets.org, they spent <a href="http://www.opensecrets.org/lobby/clientsum.php?id=D000021859&amp;year=2011">$560,000 on lobbying in 2011.</a></p>
<p>As for the carried interest tax rate, we spoke to Joseph Rosenburg of the Tax Policy Center. He estimates that raising the carried interest tax rate could boost rax revenues by about $2 billion a year, but that's just a rough estimate.</p>
<p>And yes, that $2 billion (which was in <a href="http://www.whitehouse.gov/omb">President Obama's budget proposal</a> last year) is just a drop in the bucket considering our country's trillions of dollars of debt, but aren't we in kind of a tough spot?</p><p><a href="http://www.businessinsider.com/the-private-equity-industry-has-really-spent-a-ton-of-money-to-keep-the-carried-interest-tax-rate-2012-1#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/romney-may-already-be-flip-flopping-on-the-carried-interest-tax-rate-2012-1Romney May Already Be Flip-Flopping On The Carried Interest Tax Ratehttp://www.businessinsider.com/romney-may-already-be-flip-flopping-on-the-carried-interest-tax-rate-2012-1
Wed, 25 Jan 2012 08:43:18 -0500Linette Lopez
<p><img style="float:right;" src="http://static2.businessinsider.com/image/4f0d988deab8ea3f54000055/mitt-romney-new-hampshire.jpg" border="0" alt="Mitt Romney New Hampshire" /></p><p>It will likely be around for a while, so get used to the phrase, <a href="http://www.businessinsider.com/heres-the-hot-new-way-to-attack-mitt-romney-through-private-equity-2012-1">"carried interest."</a> The Romney campaign, for its part, is trying to do it as fast as they can &mdash; with notable bumps along the way.</p>
<p>The <a href="http://online.wsj.com/article/SB10001424052970203806504577180811581675618.html?mod=WSJ_hp_LEFTTopStories#">Wall Street Journal</a> reports that yesterday, as questions surrounding the Romney tax return dominated conversation, spokespeople from the campaign wavered on their candidates stance on the 15% tax rate on carried interest earnings.</p>
<p>First, Romney policy director Lanhee Chin told reporters that the candidate may be willing to "reconsider a tax break known as <a href="http://www.businessinsider.com/heres-the-hot-new-way-to-attack-mitt-romney-through-private-equity-2012-1">'carried interest'</a> as part of a comprehensive tax overhaul"...</p>
<p style="padding-left: 30px;">There are "a number of exemptions, deductions, credits, administrative treatment of income&hellip;that would be addressed in tax reform," Mr. Chen said.</p>
<p>Later in the day, the Journal says the Romney camp was on damage control duty, reassuring voters that the candidate had no intention of raising taxes on anyone.</p>
<p>Expect this to happen again for one simple reason: The criticism of this part of tax policy is coming from all sides.</p>
<p>Of course, you expect it from President Obama and the Democrats. Here it was in last night's S<a href="http://dyn.politico.com/printstory.cfm?uuid=B9D6DC34-0551-5FD8-12AFD0CC7FCCC2F9">tate of the Union address</a>:</p>
<p style="padding-left: 30px;">"...we need to change our tax code so that people like me, and an awful lot of Members of Congress, pay our fair share of taxes. Tax reform should follow the Buffett rule: If you make more than $1 million a year, you should not pay less than 30 percent in taxes. <strong>And my Republican friend <a class="hidden_link" href="http://www.businessinsider.com/blackboard/tom-coburn">Tom Coburn</a> is right: Washington should stop subsidizing millionaires.</strong> In fact, if you&rsquo;re earning a million dollars a year, you shouldn&rsquo;t get special tax subsidies or deductions."</p>
<p>There it is... the bipartisan support, called out in the speech. Then there was the Republican response, given by&nbsp; Indiana Governor <a class="hidden_link" href="http://www.businessinsider.com/blackboard/mitch-daniels">Mitch Daniels</a> <a href="http://www.washingtonpost.com/blogs/ezra-klein/post/wonkbook-five-policies-to-watch-from-obamas-state-of-the-union/2012/01/25/gIQAn95tPQ_blog.html?wprss=ezra-klein">(via WonkBlog)</a>:</p>
<p style="padding-left: 30px;">(We need to) "stop sending the wealthy benefits they do not need, and stop providing them so many tax preferences that distort our economy."</p>
<p><span style="color: #000000; font-family: Georgia,serif; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 22px; orphans: 2; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; background-color: #ffffff; display: inline ! important; float: none;"><br /></span></p><p><a href="http://www.businessinsider.com/romney-may-already-be-flip-flopping-on-the-carried-interest-tax-rate-2012-1#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/the-problem-with-romneys-tax-return-isnt-the-rate-he-paid-its-what-he-plans-to-do-about-it-2012-1The Problem With Romney's Tax Return Isn't The Rate He Paid, It's What He Plans To Do About Ithttp://www.businessinsider.com/the-problem-with-romneys-tax-return-isnt-the-rate-he-paid-its-what-he-plans-to-do-about-it-2012-1
Tue, 24 Jan 2012 12:37:00 -0500Linette Lopez
<p><img style="float:right;" src="http://static1.businessinsider.com/image/4f10767e6bb3f7cb02000022/romney-french-olympics.jpg" border="0" alt="Romney French Olympics" /></p><p>Let's start this off clearly. No, there is nothing wrong with the way <a href="http://www.businessinsider.com/blackboard/mitt-romney" class="hidden_link">Mitt Romney</a> paid his taxes. He did it legally, he paid what he owed.</p>
<p>The problem is with how much he owed <a href="http://www.businessinsider.com/oh-geez-mitt-romney-pays-the-same-tax-rate-as-someone-making-between-17000-and-69000-2012-1">(about the same as someone who makes between $17-$69K)</a> &mdash; so bash the tax code and not the Romney, right?</p>
<p>Well what about Romney's policies? Right now, he has the whole world watching him and asking the question: How would you change America if you got the chance? What injustices or wrongs do you see around you that you would correct as (arguably) the most powerful man in America?</p>
<p>There are a lot of issues he's talked about, but changing tax rates on capital gains or carried interest isn't one of them. <a href="http://www.mittromney.com/issues/tax">Here is Romney's tax plan from his website: </a></p>
<ul>
<li>Maintain current tax rates on personal income</li>
<li><strong>Maintain current tax rates on interest, dividends, and capital gains</strong></li>
<li>Eliminate taxes for taxpayers with AGI below $200,000 on interest, dividends, and capital gains</li>
<li>Eliminate the death tax</li>
<li>Pursue a conservative overhaul of the tax system over the long term that includes lower, flatter rates on a broader base</li>
<li>25% flat corporate tax rate</li>
</ul>
<p>The part of America's tax code that allows Mitt Romney to pay such a low rate (capital gains taxes) would remain unchanged if he were President, so it's fair to assume that he's okay with the rate that he pays on his income.</p>
<p>And on a call following the release of Romney's returns, <a href="http://finance.fortune.cnn.com/category/term-sheet/">Fortune's Dan Primack </a>asked the campaign directly if there were any plans to reform the tax on carried interest or capital gains:</p>
<p style="padding-left: 30px;">I asked if Romney continues to believe that carried interest should be taxed as a capital gain (as he told <a href="http://www.businessinsider.com/blackboard/techcrunch">TechCrunch</a> during the previous campaign). <strong>I could not get a straight answer. They said that Romney is dedicated to a cleaner, fairer tax system that includes fewer loopholes &ndash; but only in a comprehensive manner. </strong>They also said Romney is opposed to raising anyone&rsquo;s taxes.<strong> When I pushed for a yes/no on if a carried interest change could be included in that comprehensive manner, the campaign moved on to the next questioner. How could they not have been prepared for that one?</strong></p>
<p>&nbsp;That's a good question.</p>
<p><span style="color: #222222; font-family: arial,helvetica,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 18px; orphans: 2; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px; background-color: rgba(255, 255, 255, 0.918); display: inline ! important; float: none;"><br /></span></p><p><a href="http://www.businessinsider.com/the-problem-with-romneys-tax-return-isnt-the-rate-he-paid-its-what-he-plans-to-do-about-it-2012-1#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/jim-cramer-goes-on-twitter-tirade-blasting-corruption-and-how-little-taxes-in-hedge-funders-pay-2012-1Jim Cramer Goes On Twitter Tirade, Blasting Corruption And How Little Taxes In Hedge Funders Payhttp://www.businessinsider.com/jim-cramer-goes-on-twitter-tirade-blasting-corruption-and-how-little-taxes-in-hedge-funders-pay-2012-1
Sat, 21 Jan 2012 12:20:16 -0500Joe Weisenthal
<p><a class="hidden_link" href="http://www.businessinsider.com/blackboard/jim-cramer">Jim Cramer</a> just blasted out a string of angry tweets in regards to the taxes that hedge funders pay.</p>
<p><img src="http://static1.businessinsider.com/image/4f1af2f469bedd3510000016/image.png" border="0" alt="image" /></p>
<p>Cramer's anger on this subject follows on the heels of an even more unlikely critic of tax loopholes: <a href="http://www.businessinsider.com/now-rupert-murdoch-is-attacking-that-pesky-private-equity-tax-loophole-with-tweets-2012-1">Rupert Murdoch</a> also took to twitter to complain of the low tax rates paid by PE folk.</p>
<p>This is obviously a re-emerging issue, and those who benefit from low carried interest tax rates can't be happy that <a class="hidden_link" href="http://www.businessinsider.com/blackboard/mitt-romney">Mitt Romney</a> is now making this issue such a big deal again, and that he (and others in the industry) are getting raked over the coals by such establishment folks as Cramer and Murdoch.</p><p><a href="http://www.businessinsider.com/jim-cramer-goes-on-twitter-tirade-blasting-corruption-and-how-little-taxes-in-hedge-funders-pay-2012-1#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/now-rupert-murdoch-is-attacking-that-pesky-private-equity-tax-loophole-with-tweets-2012-1Now Rupert Murdoch Is Attacking That Pesky Private Equity Tax Loophole With Tweetshttp://www.businessinsider.com/now-rupert-murdoch-is-attacking-that-pesky-private-equity-tax-loophole-with-tweets-2012-1
Fri, 20 Jan 2012 14:05:29 -0500Ben Walsh
<p><img style="float:right;" src="http://static1.businessinsider.com/image/4e288a2accd1d5f932110000/rupert-murdoch.jpg" border="0" alt="Rupert Murdoch" /></p><p>The twitter exploits of Rupert Murdoch show no signs of slowing down.&nbsp;</p>
<p>After recently spending a considerably number of tweets addressing internet piracy and SOPA, the media mogul has now turned his attention to a tax loophole private equity managers use, known as carried interest.</p>
<p>Murdoch hits out a <a class="hidden_link" href="http://www.businessinsider.com/blackboard/mitt-romney">Mitt Romney</a> for taking advantage of the loophole and at President Obama for not doing enough to close it.</p>
<p>Carried interest allows managers of private equity funds to have their management fees taxed not as personal income, but as long-term capital gains, which have a maximum individual rate of 15%.</p>
<p><strong>Here's what Murdoch had to say:</strong><br />&nbsp;</p>
<p><img src="http://static3.businessinsider.com/image/4f19b4de69beddf17100000b/murdoch-tweet.jpg" border="0" alt="murdoch tweet" /></p>
<p><img src="http://static1.businessinsider.com/image/4f19b474eab8ea055500000c/murdoch-tweet.jpg" border="0" alt="murdoch tweet" /></p>
<p>&nbsp;</p><p><a href="http://www.businessinsider.com/now-rupert-murdoch-is-attacking-that-pesky-private-equity-tax-loophole-with-tweets-2012-1#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/the-names-of-the-hedge-funds-that-donated-10-million-to-fend-off-finreg-and-who-they-gave-to-2011-1Here Are All The Names Of The Hedge Funds That Donated $10 Million To Fend Off Financial Regulationhttp://www.businessinsider.com/the-names-of-the-hedge-funds-that-donated-10-million-to-fend-off-finreg-and-who-they-gave-to-2011-1
Wed, 05 Jan 2011 17:10:51 -0500Courtney Comstock
<p><img style="float:right;" src="http://static6.businessinsider.com/image/4c8fbe697f8b9a5e25930700-202-151/steve-cohen.jpg" border="0" alt="steve-cohen" width="202" height="151" /></p><p>A <a href="http://today.msnbc.msn.com/id/40913123/ns/politics/">recent scandal that just kind of erupted in Washington</a> is the high number of hedge fund executives who have donated to "bankroll the GOP victory," or more specifically, to fend off some of the financial regulations proposed in the new bill.</p>
<p>The story is going nuts <a href="http://twitter.com/drtonyah/status/22757461681250305">on Twitter</a> anyway.</p>
<p>Most of the information is nothing new, and nothing too extraordinary, considering each of the donators has well over $10 million in their personal bank account but that didn't stop&nbsp;MSBC from listing the&nbsp;names, along with how much they donated and to whom,&nbsp;of dozens of high profile hedge funders in <a href="http://today.msnbc.msn.com/id/40913123/ns/politics/">a report on Wall Street execs bankrolling the GOP election</a>.</p>
<p>Here's everyone who was named and what was said about their donations:</p>
<ul>
<li><span style="font-family: Georgia, Times, serif; font-size: 15px; line-height: 24px; color: #333333;"><span style="color: #000000; font-family: helvetica, arial, sans-serif; line-height: 19px; font-size: 13px;"><img style="float:right;" src="http://static6.businessinsider.com/image/4d24e664cadcbbca39050000/john-griffin-blue-ridge-capital.jpg" border="0" alt="john-griffin-blue-ridge-capital" width="155" height="116" /></span></span><strong>Elliott Management</strong>'s execs and their wives donated&nbsp;$195,800 to&nbsp;Rep. Scott Garrett, a little known Republican from northern New Jersey who this week is slated to become the new chairman of the House Financial Services subcommittee on capital markets. (It doesn't sound <em>that bad</em> until you read that&nbsp;Elliott executives &mdash; one of whom wrote a check for $35,000 &mdash; ended up providing about 96 percent of all the funds raised by the Garrett committee.)</li>
<li><img style="float:right;" src="http://static1.businessinsider.com/image/4c73f3657f8b9ad05a5f0100/paul-singer-elliot.jpg" border="0" alt="paul-singer-elliot" width="175" height="131" />Elliott's COO&nbsp;<strong>Keith Horn</strong> apparently rounded up the majority of the donations mentioned above</li>
<li>Elliott's <strong>Paul Singer</strong>&nbsp;and other Elliot executives, donated nearly $500,000 to the National Republican Senatorial Committee. He also held fundraisers for the group.</li>
<li><strong>SAC Capital's Steve Cohen</strong>, was named for <a href="http://www.businessinsider.com/steve-cohen-hosts-a-dinner-party-with-big-republican-donors-to-make-sure-they-win-next-time-2010-8">hosting a dinner this summer</a> to ensure that Republicans win the election and also for his firm's donating&nbsp;$31,400&nbsp;to&nbsp;Incoming Majority Leader Eric Cantor of Virginia, who has apparently been a key critic of the proposal to tax &ldquo;carried interest&rdquo; as regular income. And also for donating part of a $6 million donation that went to the Republican Governors Association. The others who donated are detailed below.</li>
<li><strong><img style="float:right;" src="http://static4.businessinsider.com/image/dfb9b914b2bb954904f14300/kengriffin-tbi.jpg" border="0" alt="kengriffin tbi" width="167" height="125" /></strong><span style="font-family: Georgia, Times, serif; font-size: 15px; line-height: 24px; color: #333333;"><span style="color: #000000; font-family: helvetica, arial, sans-serif; line-height: 19px; font-size: 13px;"></span></span><strong>Ken Griffin</strong>, president of Chicago&rsquo;s Citadel Investment, and his wife, <strong>Anne of Aragon Asset Management</strong>,&nbsp;<a href="http://www.businessinsider.com/wall-street-gossip-12-4-2010-12">gave $500,000</a> in the election&rsquo;s waning days to American Crossroads. Griffin also donated part of the $6 million donation that went to the Republican Governors Association that Cohen was also a part of.</li>
<li><strong>Bruce Kovner</strong> of Caxton Associates in Princeton, N.J.</li>
<li><strong>Robert Mercer</strong>, co-chairman of Renaissance Technologies gave&nbsp;$600,000 into Concerned Taxpayers of America&nbsp;</li>
<li><strong>John Paulson</strong>, the chairman of Paulson &amp; Co. of Manhattan donated part of the $6 million donation that went to the Republican Governors Association that Cohen and Griffin were also a part of.</li>
<li><strong><img style="float:right;" src="http://static3.businessinsider.com/image/4b9904797f8b9ad74dda0400/bruce-kovner.jpg" border="0" alt="Bruce Kovner" width="171" height="128" /></strong><strong>Blue Ridge Capital</strong> gave&nbsp;$32,400 to&nbsp;Inc<span style="font-family: Georgia, Times, serif; font-size: 15px; line-height: 24px; color: #333333;"><span style="color: #000000; font-family: helvetica, arial, sans-serif; line-height: 19px; font-size: 13px;">oming Majority Leader Eric Cantor of Virginia, who has apparently been a key critic of the proposal to tax &ldquo;carried interest&rdquo; as regular income</span></span></li>
<li><strong>Gruss Investments</strong> gave&nbsp;$50,200 to Eric Cantor (see above)</li>
<li><strong>AQR's Cliff Asness </strong> also donated part of the $6 million donation that went to the Republican Governors Association that Cohen, Griffin, and Paulson were also a part of.</li>
</ul><p><a href="http://www.businessinsider.com/the-names-of-the-hedge-funds-that-donated-10-million-to-fend-off-finreg-and-who-they-gave-to-2011-1#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/steve-schwarzman-taxes-hitler-invaded-poland-2010-8Steve Schwarzman On Tax Increases: "It's Like When Hitler Invaded Poland"http://www.businessinsider.com/steve-schwarzman-taxes-hitler-invaded-poland-2010-8
Mon, 16 Aug 2010 08:35:00 -0400Courtney Comstock
<p><img style="float:right;" src="http://static3.businessinsider.com/image/6f7a6c79935e9c494516c600-308-231/steveschwarzman-tbi.jpg" border="0" alt="steveschwarzman tbi" width="308" height="231" /></p><p>Word of mouth <a href="http://www.newsweek.com/2010/08/15/schwarzman-it-s-a-war-between-obama-wall-st.html">says that</a> Blackstone founder Steve Schwarzman got suddenly very passionate when talking about tax hikes in July.</p>
<p>He was speaking to board members of a nonprofit organization when, apparently, Schwarzman started comparing the proposal to increase taxes on private equity firms to the conditions in Nazi Germany.</p>
<p><a href="http://www.newsweek.com/2010/08/15/schwarzman-it-s-a-war-between-obama-wall-st.html">Newsweek</a> doesn't name the charity board in question, nor their sources, but rumor is that Schwarzman said fighting with the administration over the taxes is something like this:</p>
<p>&ldquo;It&rsquo;s a war."</p>
<p>&ldquo;It&rsquo;s like when Hitler invaded Poland in 1939.&rdquo;</p>
<p>Apparently he wasn't too excited about the proposal to tax carried interest at the normal rate back in 2008, either. Read more at <a href="http://www.newsweek.com/2010/08/15/schwarzman-it-s-a-war-between-obama-wall-st.html">Newsweek</a> &gt;&gt;</p><p><a href="http://www.businessinsider.com/steve-schwarzman-taxes-hitler-invaded-poland-2010-8#comments">Join the conversation about this story &#187;</a></p>